Fair Work Australia’s decision to increase the national minimum wage may lead to job losses across the already troubled retail industry and create a wage inflation that could push Reserve Bank to raise interest rates. The move to boost minimum wage by $19.40 to $589 will apply to 1.4 million low-paid workers starting 1 July 2011.

Leading economists warned that the move to increase wage could have negative consequences if the increase is not offset by productivity gain. Small businesses and retail sector will be the hardest hit by Fair Work Australia’s decision, many of which are already dealing with decreasing profits and increase of business operating cost.